DAS (direct attached storage/local) and SAN (storage area network) are typically used for different needs and budgets.
Virtualization isn't just the concept of merging servers -- its the concept of better utilizing resources. Additionally if you want any sort of high availability you need shared storage.
Storage "speed" usually comes in three numbers. IOP/s (the number of disk operations per second), Read speed (mb/s raw read), and 'speed' (access time in MS). Typically a 7,200 rpm disk is good for ~90iops, a 10k rpm SAS for ~120, and a 15k SAS for ~150. (SSD is crazy .. 5k+). Your speed with spinning disks comes down to quantity times measurement per disk.
10 internal disks should have a similar IOPS profile to 10 external disks. 10 internal disks on a 6gb SAS link (to each disk) will be faster (throughput) than 10 disks on a 1GB iSCSI link, and similar to a 10GB/8GB iscsi/fc link.
The move to shared/SAN storage is typically done when you have more than one host and need the flexability and features of such a system (snapshots, replication, volume management).
Internal storage is faster, cheaper, and simpler.
External storage is more expensive, more feature rich, easier to leverage for virtualization, and can enable high availability and disaster recovery toolsets.
We use 16 disk arrays shared between our VMware hosts. It is faster than 2/4/6 internal disks using the logic above.